Top Management's Perceptions of Changes in HRM Practices after Union Elections in Small Firms: Implications for Building Competitive Advantage

By Flanagan, David J.; Deshpande, Satish P. | Journal of Small Business Management, October 1996 | Go to article overview

Top Management's Perceptions of Changes in HRM Practices after Union Elections in Small Firms: Implications for Building Competitive Advantage


Flanagan, David J., Deshpande, Satish P., Journal of Small Business Management


Sustainable competitive advantages are fundamental to a firm's long-run success. A sustainable competitive advantage is derived from a firm's resources or capabilities that are unique to the firm, cannot be easily duplicated by competitors, and offer customers special value (Barney 1991; Hitt, Ireland, and Hoskisson 1995). Without sustainable competitive advantages, a firm cannot expect to make above-average returns in the long run.

Management of human resources has been acknowledged as an important factor in developing sustainable competitive advantage (Pfeffer 1995; Lado and Wilson 1994; Kydd and Oppenheim 1990). Unlike other resources (plant and equipment or product design, for example), superior human resources tend to be very difficult for competitors to duplicate. Companies such as Walmart, Southwest Airlines, and Nucor Steel have grown large and earned outstanding returns by nurturing their human resources (Harris and Kliener 1993; Pfeffer 1995; Jacobson 1993). Because small businesses tend to be more labor-intensive than large businesses (Miller 1987), building competitive advantage through human resources may be particularly important to small business managers.

Certain human resource management (HRM) practices have been identified as crucial to developing sustainable competitive advantage through human resources. These practices include selectivity in recruiting, high wages, training, performance-based rewards, job security, teamwork, flexibility, information sharing, and empowerment (Pfeffer 1995; Lado and Wilson 1994). When these practices are present, firms are more likely. to utilize human resources effectively in building a sustainable competitive advantage.

Labor unions can have a major impact on a firm's HRM practices. It has been argued that unions not only limit an organization's discretionary authority to change workplace practices, but also have a negative effect on productivity (Holly and Jennings 1994). Also, union workers generally report lower job satisfaction and higher conflict with management than do non-union workers (Freeman 1994). Unions can also affect the median wage of the workforce. The unionized blue collar worker's median wage is about 70 per cent higher than that of his/her non-unionized counterpart (Bureau of Labor Statistics 1993).

It is important to note, however, that many observers argue that unions can be and often are a positive influence on firms and productivity. Bluestone and Bluestone (1992) argue that unionized firms keep management working to improve productivity in order to satisfy workers' demands for higher wages. The Harvard model argues that unions provide an excellent means for getting workers' valuable opinions aired and for "shocking" management into adopting better practices (Turnbull 1991).

Labor unions have begun to recognize that small businesses are excellent candidates for organizing activities. A national survey of employees conducted by Louis Harris and Associates for the AFL-CIO Committee on the Evolution of Work (AFL-CIO 1985) indicated that there were high levels of dissatisfaction with wages, working conditions, and benefits among employees of non-unionized small firms (Brown, Hamilton, and Medoff 1990). Additionally, as they have lost members in many large firms due to downsizing, unions have begun to concentrate their organizing efforts on small firms (Brown, Hamilton, and Medoff 1990).

Despite the debate on unions' impact on the workplace, no empirical research has been published comparing changes in HRM practices in firms in which unions have won elections to firms in which unions have lost elections. The goal of this study is to begin to fill this void in the literature by examining the perceptions of top managers of small firms regarding how various HRM practices changed in their firms after union elections. Given the role of HRM practices in developing sustained competitive advantage, this is an important issue for small firms that face union elections.

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